There are a wide variety of reasons that a small business can fail but one reason in particular contributes to the death of more small businesses than any other. Recent data suggests that approximately 80% of new businesses fail because of a lack of capital. Many of these new and young firms burn through their initial startup capital or have underestimated the amount of money required to sustain the business until profitability.
Also exacerbating the problem of under capitalization is the strict lending requirements put in place from most of the traditional financing channels available today. Through understanding and new funding opportunities it is likely that there will be a reduction in the percentage of failing small businesses.
Identifying under capitalization as a major reason why small businesses fail is part of the solution to this epidemic. Most entrepreneurs or young business owners that start a new business simply don’t have the experienced required to foresee operational costs. Even if they have a grip on the financial expectations, it is likely that they will not be prepared for the black swans or the unexpected financial calamities that every young business inevitably faces. Not having money to maintain a business for any reason will crush any chance at success and this is why having access to additional capital makes the difference between success and failure.
The other part of the small business failure conundrum is actually getting access to additional capital. Although banks have made it difficult to obtain a business loan the internet has acted as a catalyst to a variety of new funding sources available. Many business owners are not aware that these programs even exist.
The following data provides small business owners with a visual representation of the effect that under capitalization has on small businesses and it also displays the new and growing supply of small business funding sources that exist today. If you are a small business owner there is good reason to suggest that acquiring business loans can ensure the success of your new or young company.